The Massachusetts Legislature will today consider a sweeping compromise between the business community and progressive groups on the issues of paid family and medical leave, minimum wage and a reduction of the state sales tax.

The so-called “grand bargain” follows months of negotiations among employers, labor unions, community groups and legislators seeking to eliminate three potential November ballot questions – one asking voters to approve paid leave, a second to raise the minimum wage to $15 per hour and a third to reduce the sales tax from 6.25 percent to 5 percent.

Debate on the compromise comes two days after the Massachusetts Supreme Judicial Court disallowed a proposed constitutional amendment that would have imposed a surtax on incomes of more than $1 million and earmarked the money for transportation and education.

“AIM has worked diligently under difficult circumstances to get the best deal possible for Massachusetts employers on all three issues,” said Richard C. Lord, President and Chief Executive Officer of AIM. “We commend the representatives of the Raise Up Coalition, other business groups, and the members of the General Court for working long and hard to reach an agreement.”

“While everyone gives something during a negotiation, we are satisfied and believe that our member employers are better off with a legislative compromise than with voter approval of the language of the ballot questions as drafted.”

The compromise will phase in mandated paid family and medical leave over three years for all Massachusetts employers. AIM and other business groups negotiated reductions in the duration of family leave from 16 weeks in the proposed ballot question to 12 weeks, and of personal medical leave from 26 weeks to 20 weeks.

The cost of the program may be split between employers and workers, though the sharing arrangements are different based upon the type of leave and the size of a company.

More importantly, the compromise includes an opt-out provision for employers with programs that offer benefits greater than or equal to what an employee would receive in the state program.

Workers on paid leave will earn 80 percent of their wages up to 50 percent of the state average weekly wage, then 50 percent of wages above that amount, up to an $850 cap.

The compromise envisions that the Retailers Association of Massachusetts will drop its proposed ballot question on reducing the sales tax. In return, the compromise will phase out the requirement that retail workers earn time-and-a half for working on Sundays; create a permanent, two-day sales tax holiday; and will not include an automatic indexing provision of the minimum wage, currently $11 per hour and increasing to $15 per hour over five years.

The negotiations were carried out against the backdrop of polls indicating overwhelming support for all three ballot questions, not surprising given that the proposals appeared to offer something for nothing. Recent polls put support for the paid family and medical leave question at 82 percent and support for a $15 minimum wage at 78 percent.

Experts believe that a campaign to defeat questions with those sorts of poll numbers could cost $10 million per initiative. The ballot process is one-sided, winner-take-all. Coming to a legislative compromise avoids that by allowing a broader group of people to have input into key decisions to create policies that work for everyone.

AIM’s objectives for the negotiations were clear:

Encourage a legislative compromise that is balanced and fair, and that protects a strong Massachusetts economy.

Create programs that are accountable, have strong controls, and allow employers the flexibility to offer benefits that will attract and retain their employees.

Associated Industries of Massachusetts has been negotiating for more than six months to reach reasonable compromises on three potential ballot questions that collectively could wreak havoc on the Massachusetts economy.

I write today to report on where we stand in those negotiations and how the outcome may affect your company and the 4,000 other employers who make up the largest employer association in the commonwealth.

The proposed ballot questions put forward by a coalition of unions and progressive groups would ask voters in November to:

mandate paid family and medical leave for Massachusetts employees;

increase the state minimum wage to $15 per hour; and

reduce the sales tax from 6.25 percent to 5 percent.

A fourth question, a constitutional amendment that would impose a 4 percentage-point surtax on incomes of more than $1 million, has been challenged by myself and four other prominent business leaders in the courts. The Massachusetts Department of Revenue estimates that 80 percent of the returns that would be affected by the surtax include some amount of business income.

We engaged in these negotiations for several important reasons.

First, the AIM Board of Directors and the larger membership of the association believed it was in the best interests of employers to pursue a negotiated settlement that might moderate the radical nature of the three initiatives.

Second, House Speaker Robert DeLeo and Senate President Harriett Chandler asked AIM, other business groups and sponsors of the three initiatives in early April to expand the discussions and work toward a “grand bargain” that would allow the Legislature to resolve all the issues before they reached the ballot. AIM agrees with the legislative leaders that initiative petitions represent an inefficient method of addressing public policy decisions that should be left to elected lawmakers.

There is, finally, the sobering reality that the questions enjoy overwhelming support in early voter polls, not surprising given proposals that appear to offer something for nothing. Recent polls put support for the paid family and medical leave question at 82 percent and support for a $15 minimum wage at 78 percent.

Experts believe that a campaign to defeat questions with those sorts of poll numbers could cost $10 million per initiative. The ballot process is one-sided, winner-take-all. Coming to a legislative compromise avoids that by allowing a broader group of people to have input into key decisions to create policies that work for everyone.

Our objectives for the negotiations have been clear:

Encourage a legislative compromise that is balanced and fair, and that protects a strong Massachusetts economy.

Adopt a compromise that protects jobs by keeping Massachusetts a competitive place to do business for employers.

Create programs that are accountable, have strong controls, and allow employers the flexibility to offer benefits that will attract and retain their employees.

Any compromise on the three issues will have to be wrapped up before ballots go to print in early July. And to make matters even more confusing, conclusion of a “grand bargain” is inextricably tied to an imminent decision by the Massachusetts Supreme Judicial Court on the graduated income tax proposal.

AIM has said virtually nothing publicly about the ongoing negotiations because participants agreed at the outset to maintain the confidentiality of the discussions. The idea was that it would be harder to reach common ground if everyone litigated the issues in the news media. We have honored our confidentiality promise, and, even now, cannot disclose all the details of the negotiations until a deal is in place.

Here is what we can tell you.

Negotiations on the paid family and medical leave question began in November and significant progress has been made toward compromise. The talks have been intense but respectful on a complex and multi-faceted proposal that could add more than $1 billion in benefit costs to employers and workers if passed in November.

Challenging issues remain and anyone involved in negotiations knows that the final compromises are always the most difficult. But it’s fair to say that we are confident about reaching an agreement on a paid leave plan that will be far less economically punitive than the one set out in the ballot question.

That question would allow covered workers to take up to 16 weeks of family leave or 26 weeks of medical leave. Workers could take family leave to care for a child after the child’s birth, adoption, or placement in foster care; to care for a seriously ill family member; or to address needs arising from a family member’s active duty military service.

The prospects for agreement on minimum wage and the sale-tax decrease are more uncertain.

Raise Up Massachusetts, the coalition behind the minimum wage, paid leave and the income surtax, sent a letter last week to DeLeo and Chandler indicating that the talks had reached a “standstill” over proposals from the Retailers Association of Massachusetts to eliminate time-and-a-half for Sunday retail work and creation of a minimum wage for teen-aged workers.

Progressive groups have since stepped up their public campaign with a massive lobbying effort on Beacon Hill and a separate protest for the $15 per hour minimum wage that tied up traffic for hours on Monday in Boston’s financial district.

Jon Hurst, President of the retailer’s organization that is sponsoring the proposal to reduce the sales tax, said last week that business groups remain committed to finding a solution on all issues.

“Although our ballot proposal has the support of almost 70 percent of voters in a recent public poll, we remain committed to working with legislators, other employer organizations, and other negotiators to see if a legislative solution can be reached,” Hurst said.

AIM members need to understand that we will be satisfied but far from happy if we reach a grand bargain. None of the potential agreements on paid leave, minimum wage or sales tax will be the ones employers would have designed. We may be able to improve some potentially catastrophic ballot initiatives, but employers will still ultimately face the unsavory trifecta of mandated paid leave, an accelerating minimum wage and possibly an income tax surcharge.

The long-term lesson may be a fundamental change in the way employers approach ballot questions. Stay tuned.

Please contact John Regan, Executive Vice President, Government Affairs, at jregan@aimnet.org for updates on these issues.

Today marks 100 days until the Massachusetts Legislature wraps up formal business for its 2017-2018 session.

The end of formal sessions will bring with it the usual eleventh-hour debate on bills that will otherwise have to go back to the starting line when a new session begins in January 2019. Informal sessions continue through the end of the year, but the rules of the Legislature make it all but impossible for controversial bills to pass.

Associated Industries of Massachusetts, as the statewide employer association, looks forward to representing employers late into the evening of July 31 – perhaps into the wee hours of August 1 – as lawmakers consider bills that could have a profound effect on employers and the Massachusetts economy.

But the real Beacon Hill deadline that employers need to keep their eye on this year is the first week of July. That’s because the end of the legislative session is inextricably bound up with four potential questions that could appear on the November election ballot, and any compromise on those issues will have to be wrapped up before ballots go to print in early July.

The most important issues for AIM at the end of the session all revolve around these potential ballot questions and ongoing negotiations intended to develop compromises that could be approved by the Legislature before July 31.

AIM has been part of negotiations for more than six months on a proposal to mandate paid family and medical leave for Massachusetts employees.

The association opposes the question, which would cost $1 billion annually by allowing covered workers to take up to 16 weeks of family leave or 26 weeks of medical leave. Workers could take family leave to care for a child after the child’s birth, adoption, or placement in foster care; to care for a seriously ill family member; or to address needs arising from a family member’s active duty military service.

John Regan, Executive Vice President of Government Affairs for AIM, has been hashing out the paid-leave issues with representatives of Raise Up Massachusetts, the coalition sponsoring the proposal. All sides remain committed to seeking a fair agreement that does not inflict significant damage to the economy.

A poll of AIM-member employers last week indicated that companies favor by a two-to-one margin reaching a negotiated settlement.

House Speaker Robert DeLeo and Senate President Harriett Chandler have convened separate negotiations on proposed ballot questions that would increase the minimum wage to $15 per hour and reduce the state sales tax from 6.25 percent to 5 percent.

And looming over all the negotiations is a pending decision by the Massachusetts Supreme Judicial Court on a challenge that four business association colleagues and I filed to a proposed constitutional amendment that would impose a 4 percentage-point surtax on incomes more than $1 million. A decision in that case is expected this spring, adding pressure to the already tight time frame for finding common ground on the other questions.

“AIM will follow hundreds of bills as the session comes to an end, but creating a better and less burdensome paid family and medical leave law will be the priority,” Regan said.

“The minimum-wage increase and graduated income tax are right behind that. The objective is to provide the Legislature with the opportunity to resolve all these issues rather than mounting multiple ballot campaigns that could cost $10 million each.”

Attorney General Maura Healey today certified proposals for mandated paid family leave and a $15 per-hour minimum wage for inclusion on the 2018 statewide ballot questions.

The two initiative petitions were among 21 potential ballot questions certified by the attorney general. Also approved were petitions to reduce the sales tax and re-establish an annual sales-tax holiday. Of concern to the business community were petitions to raise the annual percentage of renewable energy use in Massachusetts and mandate nurse-staffing ratios by statute.

The decisions mean that the 2018 ballot may contain three major proposals of concern to business – the paid leave and minimum wage petitions, and a constitutional amendment that would establish a 4 percent surtax on incomes of more than $1 million.

“The employers of Associated Industries of Massachusetts are deeply disappointed with the decision to certify the paid-leave and minimum-wage increase questions. The paid-leave petition would create a new $1.3 billion benefit program that could increase by 40 percent every year,” said John Regan, Executive Vice President of Government Affairs at Associated Industries of Massachusetts.

“Employers will review the attorney general’s certification before deciding on the next step.”

The paid-leave proposal would allow covered workers to take up to 16 weeks of family leave or 26 weeks of medical leave. Workers could take family leave to care for a child after the child’s birth, adoption, or placement in foster care; to care for a seriously ill family member; or to address needs arising from a family member’s active duty military service.

Workers taking family or medical leave would receive 90 percent of their average weekly earnings, up to $1,000 per week. Beginning January 1, 2021, the weekly cap on benefits could be adjusted annually based on the Consumer Price Index published by the United States Department of Labor for the Boston metropolitan area.

The proposed law would create a trust fund into which employers would pay 0.63 percent of each employee’s annual wages, up to half of which could be deducted from employee wages. Beginning October 1, 2021, the contribution rate would be reviewed and adjusted annually to ensure funding of at least 140 percent of the amounts paid out during the previous year.

AIM estimates that the likely cost per week per employee to fund the program will exceed $520 per employee yearly, more than the average $508 per employee that companies now pay for the $1.3 billion Massachusetts Unemployment Insurance program.

The minimum wage proposal would boost the commonwealth’s base wage from the current $11 per hour to $12 in 2019; $13 in 2020; $14 in 2021; and $15 in 2022. The proposed law would also raise the minimum cash wage that must be paid to tipped employees, which was $3.75 per hour as of January 1, 2017, to $5.05 in 2019; $6.35 in 2020; $7.64 in 2021; and $9 in 2022.

Three-quarters of Massachusetts employers would face increases in their compensation costs if state lawmakers pass a $15 per hour minimum wage, according to two recent surveys by Associated Industries of Massachusetts.

And those compensation increases would be enough to force some companies to postpone hiring or consider leaving the commonwealth altogether.

Both the monthly survey question attached to the AIM Business Confidence Index in December and the annual AIM HR Practices Survey, also taken a December, found that 13 percent of companies employed people at the former $10 per hour Massachusetts minimum wage, while another 24 percent employed people at between $10 and $15 per hour and would have to raise those wages if the minimum moved to $15.

Thirty-four percent of companies employed people at slightly more than $15 and would have to increase pay for some of those employees to deal with wage compression. Thirty-seven percent of companies said they pay much more than $15 per hour and will not be affected by a minimum-wage increase.

The Massachusetts minimum wage rose by $1 to $11 per hour on January 1, the final step in a three-year increase.

“While we are empathetic with the challenges facing lower wage staff, it is also the case that we will employ fewer hourly employees at higher minimum wages. Each dollar increase costs our company $1.5 million per year,” wrote one employer on the Business Confidence Survey.

Another commented: “This would be too much for the small business community to absorb. You'll lose many small businesses. The Massachusetts legislature should concentrate on cutting costs and make Massachusetts a more affordable place to live.”

AIM believes that raising the minimum wage to $15 per hour, while emotionally appealing and politically expedient, is an ineffective way to address income inequality.

Raising the minimum wage, in fact, represents a fundamental distraction from addressing the real economic impediments that prevent all Massachusetts citizens from sharing in the state’s prosperity. These are the same impediments, ironically, that contribute to the persistent skills shortage that threatens innovation and economic growth in Massachusetts.

Workers are ultimately compensated according to the skills, education, work ethic and value they bring to the enterprise.

Minimum-wage increases impose an arbitrary standard of value on entry-level jobs, disproportionately burdening small businesses while creating no long-term improvement in living standards for people at the lower end of the wage scale. The issue in an economy with a staggering 3.3 percent unemployment rate is not how to raise the wage but instead how to raise the economic value of each employee.

Consider a sandwich shop in Cambridge serving food to employees of companies such as Google, Biogen, or Novartis that have made Massachusetts a global center for information technology, biosciences, research and development. Many of the engineers, software designers, researchers and professional services workers who come to the restaurant for lunch make six-figure incomes from companies locked in a pitched battle for talent that will determine their success or failure in the global markets.

Given the degree to which those highly compensated employees are bidding up housing and other prices in Massachusetts, increasing the minimum wage for the restaurant workers represents a dead-end and pyrrhic victory that keeps them outside the economic mainstream.

The task instead should be to pave the way for those restaurant employees to cross the street and join the high-value economy, which will once and for all allow them to support their families and achieve financial stability.

How does that happen? Start by improving the ability of our educational system to teach all students; reduce the long waiting lists for vocational schools; make community colleges accountable for graduating students with the skills needed in the marketplace; create more high-tech software coding academies; and promote other efficient structures to provide people with the skills to succeed in the areas of fastest economic growth.

Those tasks are far more complex than raising the minimum wage but ultimately more effective. The alternative is not attractive.

“If we move to minimum wage of $15 per hour in Massachusetts, we would immediately terminate many unskilled positions and use temps. That would allow us to better eliminate labor in the slower seasons. Note that our competition is located outside Mass and would end up with a significant competitive advantage,” said one employer in the survey.

A flurry of activity on Beacon Hill yesterday produced a decidedly mixed bag of legislation for Massachusetts employers.

On the positive side, a House-Senate conference committee agreed upon a reform of the Unemployment Insurance system that will stabilize UI tax rates and create relief for companies that seldom lay off workers. The agreement came hours after the House of Representatives approved an economic development bill that preserved the ability of employers to use non-compete agreements to protect intellectual property.

AIM remains disappointed, however, that the same conference committee voted to increase the Massachusetts minimum wage from the current $8 per hour to $11 per hour by 2017. Lawmakers rejected a Senate provision to index the minimum wage to the rate of inflation, but required that the state wage be 50 cents more than the federal minimum.

The Unemployment Insurance reform will:

Expand the wage base upon which UI benefits are calculated from $14,000 to $15,000 in 2015.

Incorporate an expanded rate table that makes rates more dependent on the hiring and firing record of individual companies. Rates for 2015, 2016 and 2017 will be frozen at Schedule C on the new table.

Expand the current one-year window for determining the experience rating of employers to three years.

Prohibit self-employed “persons of influence” from laying themselves off on a seasonal basis and collecting unemployment benefits.

Increase the definition of season employee from 16 to 20 weeks.

The measure does not include provisions supported by AIM to reduce the maximum duration of benefit weeks from 30 to 26 or increase the time people must work before collecting benefits.

“The UI reform takes some positive steps toward improving the efficiency of the system used to pay jobless benefits. The most important change is that employers will be rewarded for the stability of their work forces and rates are locked in for the next three years.” said John Regan, Vice President of Government Affairs at AIM.

The bill would boost the minimum wage to $9 per hour on January 1, 2015, $10 per hour on January 1, 2016 and $11 per hour on January 1, 2017. That increase would provide an average pay increase of $2,573 to 491,900 Massachusetts workers who currently earn between $8 and $11 per hour.

It would also indirectly push up wages by an average of $727 for an additional 317,200 workers because of union contracts linked to the minimum wage and general upward pressure on wages. The total tab for Massachusetts employers will come to $1.5 billion.

“AIM has argued that there are sound economic reasons not to increase the minimum wage. Far from helping poor people, moving the minimum wage to $11 an hour will simply ensure that people whose skills do not justify that wage will not find jobs,” Regan said.

The Senate is expected to vote on the unemployment insurance/minimum wage compromise today. State House News Service reports that the House may take up the measure next week.

The economic development bill approved by a vote of 125 to 23 in the House includes a $15 million middle skills jobs training grant fund, $10 million for brownfields redevelopment, efforts to boost jobs in so-called Gateway Cities and a Big Data Innovation and Workforce Fund. House members declined to include the controversial ban on non-competes.

AIM has led the opposition to proposals from Governor Deval Patrick and a group of venture capitalists to ban the enforcement of non-competes in Massachusetts. A recent survey conducted by the association found that every one of the hundreds of employers who answered favors preserving the options of employers and workers to use the agreements.

There are sound economic reasons not to raise the minimum wage in Massachusetts.

There are even sounder reasons to avoid doing so in the middle of most employers’ fiscal year.

Both chambers of the Massachusetts legislature recently passed bills to boost the commonwealth’s $8 per hour minimum wage – the House to $10.50 over three years and the Senate to $11 over three years and then indexed to inflation. The two proposals agree on one point – the minimum wage would take its first step up from $8 to $9 per hour on July 1, giving employers less than a month to budget for a change that will affect hundreds of thousands of employees.

Tipped employees currently earning $2.63 per hour would see that amount increase to $3.75 per hour over three years under the House bill and $5.50 per hour under the Senate version.

A House/Senate conference committee will hammer out the differences, but few expect a final vote to send the measure to Governor Deval Patrick until close to – or even after – July 1. The proposed $8 to $9 increase would raise the wages of an estimated 284,000 people at a total cost of $201 million.

“The clear solution, should the Legislature decide to increase the minimum wage, is to have the increase take effect on January 1, 2015. It’s patently unfair to ask employers to change their entire compensation budgets midway through the year,” said John Regan, Executive Vice President of Associated Industries of Massachusetts.

The minimum wage would rise to $10 an hour on July 1, 2015, and $11 an hour indexed starting July 1, 2016 under the Senate bill, while the House bill would increase the level to $10 per hour on July 1, 2015 and $10.50 on July 1, 2016. The minimum wage in Massachusetts last increased to $8 an hour in January 2008.

The Economic Policy Institute estimates that an $11 per hour minimum wage would provide an average pay increase of $2,573 to 491,900 Massachusetts workers who currently earn between $8 and $11 per hour. It would indirectly push up wages by an average of $727 for an additional 317,200 workers because of union contracts linked to the minimum wage and general upward pressure on wages.

That comes to a total tab of $1.5 billion for Massachusetts employers. The research raises the specter of massive wage compression in which newer and lesser skilled workers suddenly earn as much as more experienced employees who are providing value to an organization.

Companies will be forced to address the problem by adjusting their entire compensation systems, usually upward and across-the-board. The adjustments will include salary ranges, which are developed by setting range widths (difference between minimum and maximum) and relationships between range midpoints.

AIM opposes increasing the minimum wage but acknowledges that supporters have the votes to pass such a measure. Employers remain concerned about the action because it misses the real reason that many of our fellow citizens struggle to achieve an adequate standard of living - lack of appropriate training for the high-value jobs driving the state economy.

A market-based economy provides financial compensation to employees according to their ability to contribute to the success and profitability of the organization. That’s why AIM has for decades supported education reform, school-to-work initiatives, increased opportunities for training, community-college-based training initiatives, tax credits for training, and funding for the Massachusetts Workforce Training Fund.

Increasing the minimum wage has the perverse effect of limiting opportunity for young and lower-skilled workers and pushing jobs out of the market. Far from helping poor people, moving the minimum wage to $11 an hour will simply ensure that people whose skills do not justify that wage will not find jobs.

The more targeted approach to assist families is through the Earned Income Tax Credit (EITC), a credit currently set at 15 percent of the amount of the federal credit in Massachusetts. These sole earners derive greater economic benefit from the combined state and federal EITC. Because the EITC does not have a correspondingly negative impact on job creation and business costs, AIM has supported this approach rather than simply raising the minimum wage, or here simply indexing the wage to CPI.

Supporters of raising the minimum wage are seeking to place a question on the November statewide ballot the ballot that would bring the wage to $10.50 in January 2016. Tipped wages would climb to 60 percent of the minimum wage.

The Massachusetts House of Representatives last night joined the state Senate in passing legislation to freeze Unemployment Insurance rates and avert a $500 million tax increase on employers that took effect on January 1.

Issue closed right? Well, not so much. The two branches disagree about how to wrap that freeze into a broader set of reforms to the state’s costly UI system, so employers still find themselves staring down the barrel of a 33 percent jump in UI taxes.

Lawmakers will eventually work out their differences in a conference committee, but that process is complicated because House and Senate have passed different bills dealing with UI reform and a minimum-wage increase.

“The priority for the Legislature must be to freeze Unemployment Insurance rates for 2014 before employers pay first-quarter UI taxes. Otherwise, the economy will be saddled with an unnecessary tax increase at a time when the fund used to pay jobless benefits is financially stable,” said Richard C. Lord, President and Chief Executive Officer of Associated Industries of Massachusetts.

The House voted 123-24 last night to pass a bill that would freeze UI rates, introduce modest reforms of the Unemployment Insurance system, and raise the Massachusetts minimum wage from the current $8 per hour to $10.50 per hour over three years. The Senate passed legislation in February to increase the minimum wage to $11 per hour over three years and then link it to the rate of inflation.

The House UI reform package would:

Expand the wage base upon which UI benefits are calculated from $14,000 to $15,000 in 2015.

Incorporate an expanded rate table previously passed by the Senate that would make rates more dependent on the hiring and firing record of individual companies. Rates for 2015, 2016 and 2017 would be frozen at Schedule C on the new table.

Retain the current one-year window for determining the experience rating of employers.

Prohibit self-employed “persons of influence” from laying themselves off on a seasonal basis and collecting unemployment benefits.

Neither the House nor the Senate bills include provisions supported by AIM to reduce the maximum duration of benefit weeks from 30 to 26 or increase the time people must work before collecting benefits. AIM opposes increases to the state minimum wage.

Lord called the House vote a “step in the right direction” toward addressing UI rates that are among the highest in the nation.

“We are gratified that both the House and Senate have passed Unemployment Insurance reform. Employers did not get everything they wanted, but we look forward to continuing the conversation with Beacon Hill lawmakers in the months ahead,” Lord said.

The Massachusetts House of Representatives is scheduled to debate a bill Wednesday that would reform Unemployment Insurance and increase the state minimum wage, but continued wrangling on Beacon Hill makes it uncertain when either of those matters will land on the governor’s desk.

Employers, meanwhile, continue to confront an unnecessary $500 million increase in Unemployment Insurance taxes for 2014, even though both the House and Senate have separately approved UI rate freezes. Associated Industries of Massachusetts (AIM) today renewed its call for lawmakers to pass a stand-alone rate freeze that would avert a 33 percent rate increase before employers have to pay it.

“Time is running out to address a catastrophic tax increase that could dampen an already tentative economic recovery. The House and the Senate agree that UI rates should be frozen for 2014 - let’s pass that freeze and then engage in meaningful debate about broader UI reforms and the minimum wage,” said John Regan, Executive Vice President of Government Affairs for AIM.

The House bill to be debated this week will take the form of an amendment to legislation governing domestic workers. The measure would:

Freeze Unemployment Insurance rates for 2014.

Expand the wage base upon which UI benefits are calculated from $14,000 to $15,000 in 2015.

Incorporate an expanded rate table previously passed by the Senate that would make rates more dependent on the hiring and firing record of individual companies. Rates for 2015, 2016 and 2017 would be frozen at Schedule C on the new table.

Retain the current one-year window for determining the experience rating of employers.

Prohibit self-employed “persons of influence” from laying themselves off on a seasonal basis and collecting unemployment benefits.

Increase the Massachusetts minimum wage over three years, from the current $8 per hour to $9 per hour on July 1, $10 per hour on July 1, 2015, and $10.50 per hour in July 1, 2016. The minimum wage would not be indexed to inflation, but would always be at least 40 cents per hour higher than the federal minimum.

Include a provision supported by AIM giving employees the option of being paid semi-monthly rather than weekly or bi-weekly. Semi-monthly pay results in 24 pay periods per year while bi-weekly has 26 pay periods per year.

Neither the House bill, nor a Senate UI reform passed on February 6, include provisions supported by AIM to reduce the maximum duration of benefit weeks from 30 to 26 or increase the time people must work before collecting benefits.

Senate President Therese Murray warned last week the House decision to develop its own, combined UI/Minimum Wage bill could jeopardize its fate this session.

“That would compromise the timeframe greatly because then we would have to take up a whole new bill here which we’ve already done it twice and that could take as much as eight weeks or more during budget season so that’s why we were trying to prevent that from happening,” Murray told the State House News Service.

The Massachusetts Senate passed an Unemployment Insurance reform bill today designed to stabilize UI tax rates for most employers and make those rates more dependent on the hiring and firing record of individual companies.

The measure includes an immediate freeze of UI rates for 2014, averting an automatic 33 percent, $500 million tax increase that took effect on January 1.

Associated Industries of Massachusetts believes the Senate UI bill represents a constructive first step toward reforming the commonwealth’s burdensome system for paying benefits to jobless people. The association had hoped that the Senate would also reduce the maximum duration of benefit weeks from 30 to 26 and increase the time people must work before collecting benefits, but AIM expects to place those issues front and center when the reform moves to the House of Representatives.

“Senate President Therese Murray and Labor and Workforce Development Committee Chair Dan Wolf (right) deserve credit for taking a thoughtful and creative approach to a seemingly intractable problem. We don’t agree with everything in the bill, but it provides a basis for continuing debate,” said Richard C. Lord, President and Chief Executive Officer of AIM.

Under the Senate bill:

The wage base upon which UI payments are calculated would rise from the current $14,000 per year to $21,000 per year in 2015, a change that by itself would escalate costs for employers.

An expanded rate table would take effect in 2015, and rates would be set at a new Schedule C for 2015, Schedule A for 2016 and back to Schedule C for 2017. The expanded rate table should offset the effects of the increased wage base for companies with stable employment histories while raising rates for some companies that add and terminate workers frequently. Under the new rates, the most stable employers would pay $153 per employee per year, while the worst-rated companies would pay $2,337 per employee annually.

Company UI taxes rates will be based upon the average of three years payroll instead of one, minimizing rate shock for expanding companies or those that encounter cyclical economic problems and find themselves having to lay people off.

The definition of seasonal employment is expanded to 20 weeks of work, closing a loophole under which lawmakers say some people work seasonally and then collect Massachusetts unemployment benefits while living out of state during the winter.

“In effect, it’s revenue neutral in that we’ll collect the same amount in aggregate,” said Wolf, a Cape Cod Democrat.

Murray said in a statement: “The current system serves as a considerable burden to our businesses and it is time for change. This bill will alleviate costs for employers, provide predictability to their budgets and foster an environment where jobs can grow and be created.”

House Speaker Robert DeLeo has indicated that his chamber will consider Unemployment Insurance reform in tandem with an increase to the $8-per-hour state minimum wage. The Senate has already passed legislation increasing the minimum wage to $11 per hour over three years and indexing it to inflation thereafter.

The Unemployment Insurance Trust Fund used to pay jobless benefits in Massachusetts currently enjoys a healthy balance of approximately $800 million.

Massachusetts UI costs, driven by high wages, lenient qualification requirements and an overly generous benefit structure, are among the highest in the country. AIM has long supported reducing the maximum duration of benefit weeks from 30 to 26 when the state's economy is performing well and increasing the work requirement for eligibility to collect UI benefits from 30 times the weekly benefit amount to 40.